Graymark Healthcare Reports First Quarter 2011 Financial Results

OKLAHOMA CITY, May 16, 2011 /PRNewswire/ -- Graymark Healthcare, Inc. (NASDAQ: GRMH), the nation's second largest provider of diagnostic sleep services and an innovator in comprehensive care for obstructive sleep apnea (OSA), reported financial results for the first quarter ended March 31, 2011.

Net revenues in the first quarter of 2011 decreased 21% to $4.7 million from $5.9 million in the same year-ago quarter (as adjusted for the discontinued operations of the company's retail pharmacy business). The decreased revenue was attributable to a series of severe weather events at the company's locations in Kansas, Iowa, South Dakota, Oklahoma and Texas in January and February of 2011. As a result, several labs were forced to close on multiple days during those months, contributing to significantly reduced volumes during the quarter. In addition, the company realized lower average revenue per sleep study performed due to the company's previously announced strategy to transition from being an out-of-network provider to entering into in-network agreements with third-party payers. This transition provides Graymark the opportunity to lower administrative expenses and accelerate the receipt of reimbursement payments, resulting in improved cash flow.

Revenues from the company's sleep diagnostic business decreased 26% to $3.4 million in the first quarter of 2011 from $4.7 million in the same year-ago quarter. The decrease was attributable to the aforementioned weather events and becoming an in-network provider.

Revenues from Graymark's sleep therapy business were flat compared to $1.2 million in the same year-ago quarter. Lower average reimbursement for CPAP setups and resupply sales were offset by increased setup and resupply volumes. Resupply volume increased 120% from 1,084 packages shipped in the first quarter of 2010 to 2,389 shipped in the first quarter of 2011. Resupply represents an important recurring revenue aspect of the company's business.

Operating expenses were $4.4 million in the first quarter of 2011, decreasing 20% from $5.5 million in the same year-ago quarter. The decrease in operating expenses was primarily attributable to lease renegotiations, the consolidation of non-profitable facilities and a reduction in unnecessary corporate overhead.

Loss from continuing operations was unchanged from the same year-ago quarter at $1.7 million. Net loss attributable to Graymark Healthcare was $1.8 million or $(0.07) per share in the first quarter of 2011, compared to a net loss of $1.4 million or $(0.05) per share in the same year-ago quarter.

EBITDA from continuing operations in the first quarter of 2011 was unchanged from the same year-ago quarter at a loss of $1.1 million (see "Reconciliation of Non-GAAP Financial Measures" below for the definition and an important discussion of this non-GAAP financial measure).

At March 31, 2011, cash and cash equivalents totaled $574,000, compared to $879,000 at December 31, 2010.

Management Commentary

"Due to the resetting of patient deductibles, the first quarter is generally the most seasonally challenging for Graymark, further exacerbated by severe weather in January and February impacting over 60% of the states in which we operate," said Stanton Nelson, Graymark's chairman and CEO. "In spite of these challenges, we further enhanced the efficiency of the organization during the quarter by reducing overhead and implementing management changes and sales initiatives aimed at driving referral volume in our sleep centers. These proactive steps helped produce significantly higher sleep study volumes in March and April.

"With seven hospital partnership contracts signed so far in 2011, we appear well on track to exceed the 11 signed last year. This momentum is being driven by a better-aligned sales force pursuing a healthy pipeline of potential contracts. Combined with an increasing recurring revenue stream from converting new patients into our resupply business, we are revising our stated expectations for the year. We now expect to cross the threshold to positive EBITDA a quarter sooner than planned, and report positive EBITDA in the second quarter as well as continued EBITDA growth in the second half of the year."

About Graymark Healthcare

Headquartered in Oklahoma City, Okla., Graymark Healthcare, Inc. (NASDAQ:GRMH - News) is the nation's second largest provider of sleep management solutions. In addition to diagnosing and treating over 80 sleep disorders, the company specializes in comprehensive care for Obstructive Sleep Apnea (OSA). Graymark offers its services through 98 sleep laboratories throughout the United States, including standalone or IDTF facilities, rural outreach sites and hospital or provider agreements. For more information, visit www.graymarkhealthcare.com.

Reconciliation of Non-GAAP Financial Measures

Graymark is providing EBITDA from continuing operations information, which is defined as net income from continuing operations plus interest, income taxes, depreciation and amortization expenses a compliment to GAAP results. EBITDA is commonly used by management and investors as a measure of leverage capacity, debt service ability and liquidity. EBITDA is not considered a measure of financial performance under U.S. generally accepted accounting principles (GAAP), and the items excluded from EBITDA are significant components in understanding and assessing the company's financial performance. EBITDA should not be considered in isolation or as an alternative to, or superior to, such GAAP measures as net income, cash flows provided by or used in operating, investing or financing activities, or other financial statement data presented in the company's consolidated financial statements as an indicator of financial performance or liquidity. Reconciliations of non-GAAP financial measures are provided in this news release in the accompanying tables. Since EBITDA is not a measure determined in accordance with GAAP and is susceptible to varying calculations, EBITDA, as presented, may not be comparable to other similarly titled measures of other companies.

Important Cautions Regarding Forward Looking Statements

This press release may contain forward-looking statements that are based on the company's current expectations, forecasts and assumptions. Forward-looking statements involve risks and uncertainties that could cause actual outcomes and results to differ materially from the company's expectations, forecasts and assumptions. These risks and uncertainties include risks and uncertainties not in the control of the company, including, without limitation, the current economic climate and other risks and uncertainties, including those enumerated and described in the company's filings with the Securities and Exchange Commission, which filings are available on the SEC's website at www.sec.gov. Unless otherwise required by law, the company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

SOURCE Graymark Healthcare, Inc.

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

440k+
Newsrooms &
Influencers

9k+
Digital Media
Outlets

270k+
Journalists
Opted In

GET STARTED